Treasury moves to calm insurance sector jitters over monocurrency plan

PHILLIMON MHLANGA IN VICTORIA FALLS

Treasury has moved to steady mounting anxiety in Zimbabwe’s insurance and pensions sector, assuring industry players that the planned transition to a monocurrency regime will not trigger a repeat of the devastating value erosion that previously wiped out long-term savings, Business Times can report.

In a critical intervention at the Insurance and Pensions Symposium in Victoria Falls yesterday, Deputy Minister of Finance, Economic Development and Investment Promotion, Kudakwashe David Mnangagwa, sought to restore confidence in a sector still haunted by the scars of hyperinflation and abrupt currency shifts.

The reassurance comes as Government presses ahead with plans to migrate to a monocurrency system once key preconditions are met, a policy seen as central to restoring macroeconomic stability, but one that has stirred deep unease among insurers and pension funds exposed to long-term contractual obligations.

“Government is fully aware that a currency transition carries specific and material implications for long-term financial contracts,” Mnangagwa said.

“Insurance policies and pension fund obligations are, by their very nature, inter-temporal contracts, entered into today and honoured over years, sometimes decades. Any disruption to the currency framework can, if not managed carefully, erode the real value of these obligations and undermine policyholder and pension member confidence.”

Industry executives have warned that, without clear safeguards, a shift to a monocurrency could destabilise actuarial balances, distort asset-liability matching, and further erode public trust in long-term savings vehicles, already weakened by historical losses.

Treasury, however, moved to allay those fears, signalling that the transition will be carefully calibrated to protect the integrity of the sector.

“It is Government’s firm commitment that the envisaged monocurrency transition will not disrupt the insurance and pensions industry,” Mnangagwa said.

“We are mindful of the lessons of history and are determined not to repeat the mistakes of the past, particularly with respect to the erosion of long-term financial obligations.”

In a notable departure from past top-down policy approaches, Treasury is now opening the reform process to industry input, a move designed to enhance both credibility and technical robustness.

“We welcome input from the insurance and pensions industry on how the monocurrency transition should be designed, phased and implemented in a manner that protects policyholders, preserves actuarial integrity and maintains the confidence of all stakeholders,” Mnangagwa said.

“We urge the Insurance and Pensions Commission (IPEC) and industry associations to formalise their positions and submit substantive technical recommendations to the ministry.”

The symposium, convened by Insurance and Pensions Commission (IPEC), has become a critical platform for aligning policy direction with industry realities at a time when confidence remains fragile.

At the heart of the sector’s unease lies the unresolved legacy of pre-2009 losses, when millions of Zimbabweans saw pension values and insurance policies effectively wiped out during hyperinflation and subsequent currency reforms.

Mnangagwa acknowledged that the credibility of any new monetary framework will hinge on how Government addresses this historical overhang.

“The loss of savings, insurance policy values and pension funds experienced during the hyperinflationary period represents one of the most painful chapters in Zimbabwe’s financial history,” he said.

“That loss was not merely financial — it was a loss of trust. Rebuilding that trust is not optional. It is essential to the future of the insurance and pensions industry.”

He warned that failure to close the compensation chapter risks undermining broader reform efforts.

“No amount of regulatory reform, no amount of product innovation and no amount of marketing will restore public confidence in long-term savings if the wounds of the past remain unaddressed.”

Government has now elevated the completion of the compensation process into a strategic priority.

“The finalisation of the pre-2009 compensation exercise is explicitly among Government’s priority targets for restoring confidence in the insurance and pension sector,” Mnangagwa said.

Treasury is also repositioning the sector within the broader economic architecture, framing insurers and pension funds as critical reservoirs of long-term capital needed to finance infrastructure, industrialisation and national development.

“We do not see this as a mere industry,” Mnangagwa said. “We see it as a strategic partner in national development, a vehicle for financial inclusion and social protection, and a mobiliser of long-term capital that Zimbabwe’s development demands.”

The intervention comes as authorities seek to consolidate macroeconomic stability gains, including efforts to tame inflation volatility and stabilise the exchange rate — key preconditions for any credible currency reform.

In her opening remarks, Grace Muradzikwa, Commissioner of IPEC, underscored the need for concrete outcomes from the high-level engagement.

“Our expectation from this Symposium is clear and deliberate,” she said.

“We expect actionable insights that will inform policy and regulatory frameworks, practical solutions to the challenges facing our industry, stronger collaboration between regulators, policymakers and industry, and ultimately, renewed confidence in the insurance and pensions sector.”

Muradzikwa emphasised that the sector’s significance extends beyond financial intermediation.

“At its core, the insurance and pensions sector is about protecting livelihoods, preserving dignity in retirement, managing risk in an uncertain world, and mobilising long-term capital for national development.”